It’s been a difficult week for insurance startup Zenefits.
Just days after a BuzzFeed news report revealed that the company was using unlicensed brokers to enrol consumers in health insurance plans, co-founder and chief executive Conrad Parker resigned and was replaced by David Sacks amid compliance concerns.
Now, the benefits company is the subject of a probe by the California Department of Insurance.
Commissioner Dave Jones confirmed the existence of the investigation late Thursday, which is looking into whether Zenefits has complied with regulations requiring the licensing and training of insurance agents and brokers. The investigation has been ongoing since 2015.
San Francisco- based Zenefits makes software for businesses to automate certain aspects of their human resources operations, including health insurance. It makes money as a health
insurance broker, selling policies through providers like Anthem Blue Cross and earning the commission or broker fee.
However, there is reason to believe those selling these plans were not licensed as health insurance brokers in the states in which they were operating. According to a Thursday BuzzFeed report, Zenefits created a secret software tool to let sales representatives in California fake the completion of an online training course required for a broker license.
The program made it appear that brokers were completing the mandatory course, while in fact allowing them to spend less than the legally required 52 hours on training, Sacks said in a staff email.
It is these issues Jones and his office are investigating.
“The recent resignation of Zenefits’ CEO Parker Conrad is an important development, but it does not resolve our ongoing investigation of Zenefits’ business practices and their compliance with California law and regulations,” Jones said in a statement.
The department added that it will not release information about the investigation’s findings until the probe is complete.
This marks the second such investigation into Zenefits, following an ongoing probe by the Washington State Office of the Insurance Commissioner into “unlicensed sales related to insurance policies.”
“The investigation could result in some kind of enforcement action, but that is still undetermined,” Steve Valandra, deputy commissioner for public affairs, told
Reuters.
